Report: SLA Failures Boost Outsourcing

Both enterprises and service providers say they believe that the failure to meet service-level agreements could lead to more outsourcing of IT operations.

Both enterprises and service providers are expanding their use of service-level agreements but say they believe that the failure to meet the agreements could lead to more outsourcing of IT operations.
Service-level management provider Oblicore Inc., in its third annual survey on the use of SLAs, due out this week, found that of 140 IT professionals among enterprises that use SLAs internally, many believe that problems in complying with those SLAs could result in more IT jobs being moved offshore.

Of the 140 enterprises surveyed, 42 percent said that outsourcing is a potential outcome for not meeting SLAs.

But the upside to employing SLAs for measuring the performance of internal IT operations is that it can open the door to improvements, according to an IT and networking engineer at a European service provider, who asked not to be named.
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"When we created the first [internal] SLA, the figures werent that good. But by exposing them to everyone in the company, things were set in motion, and now we see the services have been improved and our internal clients are much happier with the services were delivering," said the engineer, an Oblicore customer.

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Both the enterprises and the 156 service providers surveyed expect the number of SLAs to continue to grow over the next year.
"We are seeing an increase in the use of SLAs," said the Oblicore customer. "Internally, we now report on 90 percent of the IT services."
The report, "Trends in the Use and Management of Service Level Agreements," showed that 42 percent of providers arent meeting SLAs 90 percent of the time.
A 10 percent failure rate that affects critical services such as disaster recovery or banking applications could be costly to the service provider, according to officials at Oblicore, in Columbia, Md. And penalties for failure to meet SLAs can be costly. Among the service providers surveyed, 88 percent have SLAs that impose penalties.
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